Business rescue in SA fails to deliver

Focus on liquidation rather than restructuring is undermining the process.

South Africa has developed similar legislation as the US and Europe to save companies and even cities in financial distress, yet the level of success in South Africa remains limited.

The Companies and Intellectual Property Commission (CIPC) reported in March this year that since the introduction of business rescue proceedings four years ago, 1 654 business rescue proceedings commenced of which 771 were ended.

Figures from StatsSA shows that more than 360 companies were liquidated between July and August this year alone. More than 830 companies are still in business rescue proceedings (since 2011).

The main factors attributing to this lack of success with rescuing a company is a continued focus on liquidation rather than restructuring, a lack of experience and a lack of forgiveness for failure, says EY Africa Tax Leader Jim Deloitte.

He says investment funds of close to $25 billion have been raised by private equity firms for investments into Africa, yet only half of it has made it onto the continent.

Deloitte says one of the reasons is that investors can see the opportunities for investing into Africa, but they are not assured by the way in which matters are managed when things go wrong.

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